HealthSouth Corp. (HLS) is producing strong results by growing its revenue and more effectively managing its costs.

Company Description

HealthSouth Corp. operates as an inpatient care provider in the United States, owning and operating inpatient rehab care centers and long-term acute care hospitals. The company was founded in 1983 and has a market cap of $1.49 billion.

Shares of HLS recently spiked higher after the company reported better than expected third-quarter results on Nov 3.

Third-Quarter Results

Revenue was up 4% from last year to $472.7 million. Earnings also came in strong at 38 cents per share, 14 cents ahead of the Zacks Consensus Estimate. HealthSouth has beat in each of the last four quarters by an average of 13 cents, or 74%.

The company noted that its earnings growth was fueled by revenue gains, lower interest expense and better expense management. HealthSouth also added that it grew its cash position by $68 million to $117.3 million, with a leverage ratio of 4.5X on $1.7 billion in debt.

Estimates Jump

Estimates jumped higher on the good quarter after HealthSouth raised its guidance, with the current-year estimate adding 13 cents to $1.45. The next-year estimate is pegged at $1.50, a modest 4% growth projection.

Valuation

In spite of the recent gains, this stocks trades with a forward P/E of just 10.5X, a nice discount to the overall market.

The Chart

Shares of HLS have posted big gains over the last 7 months and recently spiked higher on the solid earnings surprise. Take a look at the chart below.

Zacks Investment Research
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